Visalia-based California Dairies Inc.(CDI) has purchased the assets of Security Milk Producers Association,a milk cooperative that produces around 1.3 billion pounds of milk a year with sales if around $300 million. According to CDI’s president Andrei Mikhalevsky, the CDI board will finalizes a deal this week at their regular meeting.
By contrast CDI has some 490 members, produces 16.9 billion pounds milk annually and is the nation’s second largest milk cooperative. revenues in excess of $3 billion have been cited.
California Dairies, Inc. is the result of a 1999 merger of three of California’s most financially successful cooperatives; California Milk Producers, Danish Creamery and San Joaquin Valley Dairymen.
Less Milk
Mikhalevsky notes that this year milk volumes have been down around 5% from its historic range and is expecting that in 2013 member milk volume will be down around 4% largely due to the loss of some producers who have exited the business and the tough margins in the the business right now.
Mikhalevsky says Security has no physical assets except their fleet of trucks that deliver milk to Southern California processors. Most LA kids drink Security milk in their morning cereal every day.
Security general manager Hank Perkins said he could not comment but a another Security official who declined to be identified says the merger approved makes sense “because CDI already is very efficient and we need to work together to get prices up in California.” The dairyman says “things are really rough right now with the high feed prices.”
A few years ago Perkins was searching in Tulare County for a site to build a milk plant.Sources say Security,more recently, was looking to buy a so-called balancing plant that would convert milk to powder when processors did not take all the fluid milk the co-op produced but lost an opportunity and decided to hook up with CDI who has a large balancing capacity.
Both dairy co-ops have been lobbying CDFA ag secretary Karen Ross to modify rules that affect how much the state’s dairymen get for their product sold to cheese companies. California dairy producers say cheese makers pay much less here than dairymen are paid outside of California for their milk.
After some heavy lobbying there are signs Ross may entertain a new hearing on the matter sources say.